The Kotak e-Invest ULIP plan, that offers 100% premium allocation in chosen funds, has become one of the most popular offerings in its category today. Taking an investment decision is always challenging, and it takes a lot of trust and courage to make such a decision. Hence, ULIPs have become an attractive investment option, however, ULIP plans are dime a dozen and one should always choose a plan that offers 100% premium allocation.
Kotak Life’s e-Invest plan comes with a host of benefits, such as:
- 100% allocation of customers' premiums, which they pay is fully invested into the funds.
- Return of Mortality charges i.e., 25% to 200% of Life Cover charges deducted will be added to the fund value on survival of Life Assured till maturity, on maturity date based on the policy term chosen.
- Multiple plans to choose from, as per the customer’s needs.
- It provides flexibility to choose from two investment strategies, which are Self-Managed Strategy & Age-Based Strategy.
These benefits are surely a great investment choice. However, people are often confused when it comes to choosing between a ULIP or a mutual fund as their investment option.
While both plans have the potential to offer high returns in the long run and add mainly to one’s future financial security, finding the one that best suits the need is of critical significance.
A ULIP can be a wonderful addition to a portfolio. However, whether one should buy a ULIP depends on the investor themselves and their requirements. To understand which product is the right pick for the customer that fits best in their financial portfolio, it's essential to understand the product first.
Unit Linked Insurance Plans, abbreviated as ULIPs, are modern financial products that offer an option of life insurance and investment in a single plan. In ULIP, policyholders can invest in different market-linked securities and manage their investment as per the market trends by using fund-switching options. A policyholder can invest in equities, debts, bonds, or a hybrid product through ULIP. While having these options, a share of their premium is also contributed towards a life insurance cover that helps them in protecting their loved ones in case of any unfortunate event.
Mutual funds are the most popular investment options that have gained popularity recently. Although it's a high-risk investment, the return on MFs and the product being handled by market experts are why people invest in it predominantly. Mutual funds are like trusts where money from individual and institutional/corporate investors with a typical financial objective is pooled together and invested in various market products to generate profit. There are multiple types of mutual funds, and these are based on specific parameters like duration of investment, risk factors, and the kind of market. The funds on these financial products are managed by financial investors who make decisions on behalf of the investors.
Which is Better: ULIPs or Mutual Funds?
Every investor has different financial commitments, requirements, and goals. And based on these factors, one needs to decide which financial product is better and can help meet all their financial needs. Also, factors like short-term and long-term financial requirements must be considered, and investment decisions must be made accordingly. For example, while considering investing money in any plan, one cannot compromise their child’s education to accumulate funds for future life.
ULIP and mutual funds offer the option to invest in products capable of generating high returns based on various risk profiles. There is no straightforward answer to one from ULIP vs. mutual fund being better. Both the products have their benefits, and one must look through them to pick one.
For example, Kotak Life offers a ULIP plan known as Kotak e-Invest, while Kotak Mutual funds, another product of the same parent brand, offers multiple mutual fund investment options too.
The differences between both these products are summarized below -
|Parameters||ULIP||Mutual Funds (SIP)|
|Returns||Based on how the funds are invested, the choice of funds, and the risk appetite of the investor, the return can vary. This has the option of high-risk & high returns or low-risk & safe returns.
However, ULIPs can yield very high returns in the long term safely.
|The return on mutual funds (SIP) is based on how the portfolio is managed and the type of market the fund is invested in. Other factors influence the SIP returns too. Thus, one cannot predict the return on mutual funds, but one can surely get an idea of the return through the market sentiments and trends.|
|Lock-in Period||Minimum lock-in period of five years||Generally, has a lock-in period of three years. However, it may vary based on policy|
|Tax Benefits||ULIPs come with tax benefits under Sections 80C and 10 (10D) of the Income Tax Act. A policyholder can take tax exemption benefits on all three stages of investment premium paid and proceeds generated, and maturity sum.||Taxation in SIP is based on various factors. An investor must read the policy terms carefully.|
|Liquidity options||One can extract funds from ULIPs after completion of the lock-in period. The investors also have the option of partial withdrawal before completion of the lock-in period. All the options related to equity are subjected to policy guidelines.||Can be liquidated as per the investor's choice based on the policy terms.|
Choosing between ULIPs and Mutual Funds is like a never-ending debate. ULIP, on one hand, is a great long-term investment option that helps in the accumulation of a considerable corpus; mutual funds, on the other, can be used to meet short-term goals through investment options like SIPs. So, it is on the investor and their financial goals to decide which one to choose from ULIP vs mutual fund. Also, it is advised to take expert opinion while choosing one of these two.